Sunday, June 30, 2013

Items – Part I

Consider that you are writing a paper invoice for your business – the description that you use for the item of inventory or type of service provided is an Item in QuickBooks.  The sales tax(es) that you charge will also be an Item.  There are 11 different types of Items in QuickBooks.  Today I will discuss the key types and how you would use them in your business

The first type we will look at is the Inventory Part Item.  You will create an Inventory Part for every part that you stock in your business for sale.  This means every size nut and bolt, every color of a 4 ounce skein of baby yarn, every brand of oil filter that you stock in your store for sale.  For each item, you will enter a separate, distinctive name, determine if you want it to be part of a larger group (i.e. the “parent” group is Nuts and each size is a subset of the group).

If you combine individual parts to make a pre-assembled part, then you will record them as an Inventory Assembly Item.

The next type is Service.  If you own a plumbing supply store selling parts to do-it-yourselfers and also have a staff of plumbers who will do the repairs for customers, then you will use both Inventory and Service Items.  The parts you use will be Inventory Items and the labor will be a Service.  As a QuickBooks consultant, I bill for services such a bookkeeping, training, trouble shooting.

The last one to be discussed today is Sales Tax.  For each taxing authority, you will need to set up a separate item for each.  You may be fortunate to only have a single statewide sales tax – then you would only need to set up one tax item.  If you collect sales tax for a city, county, or other designated tax region, you will set up an item for each.  Only enter the amount that goes to each tax authority – i.e. the overall tax you need to charge is 8% where 7% goes to the state and 1% goes to the city.  If you only want to show a single tax line on your invoice, then you will need to create a Sales Tax Group with all of the individual taxes.

Monday, June 24, 2013

Classes in QuickBooks

Classes can represent many different things – departments, regions, individuals, lines of business, service types, or locations.  Tracking performance by class can give you valuable insight into your company, showing you where you need to make tweaks or even radical changes.

To determine your classes, look at how your business runs (or where you will be making future expansion).  What is the most important way to track your business?  Do you have sites throughout the region – then creating a Class for each site might work best for you.  Are you a sales or service business and want to track by sales person or service provider?  Are you sole proprietor who is providing different services and want to see which gives you the best income or profit potential?  Any of these needs can be tracked by using Classes.

Monday, June 17, 2013

Setting up a Chart of Accounts

You just bought an accounting software program to track your business.  After you enter some basic information about the company, you will need to set up the accounts you will use.  Accounts are divided into types – Asset, Liability, Equity, Income, Cost of Goods Sold and Expense.  Assets include bank accounts, petty cash, land, building, equipment (which will be depreciated), inventory, and monies owed to you by customers.  Liabilities are what you owe to someone else including items you have purchased by credit card or on account and loans.  Equity represents the net value of the company.  Income represents what you have earned through sales or charges for services rendered.  Cost of Goods is a type expense which is directly related to how you earn money.  For example, commissions paid to sales staff based on sales they have made.  Expenses represent things you buy or other charges such as rent, utilities.
Start by setting up your banking accounts.  You will need to enter the beginning balance from your bank statement or based on when you open the account.  Give each account a name that will make it easy to identify the type or purpose of the account.  If you only have one checking account, then you can just identify it as Checking.
Equity accounts will be based on the type of business you have – sole proprietor, partnership, incorporated, non-profit.  You should not have to enter any additional Equity accounts.
If you have selected an industry specific version of the software, income accounts will have been included in the basic Chart of Accounts.  You may want to have sub-accounts to track various services or business lines.  For example, in a service company you may have an account called Service Income.  You can create accounts for the specific types of service you provide and make them sub-accounts of Service Income.
Cost of Goods Sold may be those goods purchased to make or assemble something you sell, supplies you buy for a construction project, commission costs to sales staff or other expenses directly related to producing income for your company.  You may want to create specific accounts to indicate the type of costs incurred, i.e. Inventory, Direct labor, Commissions.
The basic expense accounts will be included in the base Chart of Accounts.  Once again, you may want to add sub-accounts to better track where your money is being spent, such as adding Water & Sewer, Gas & Electric as sub-accounts under Utilities.  Are you in a service industry where continuing education is required?  Then create an expense account for expenses tied to this training, including seminars and the purchase of printed materials.

You do not have to add your accounts when you first set up your books.  Live with the accounts that came with the program and make additions as you get a feel for your business and see which income and expense accounts you want to add to track various aspects of your business.

Saturday, June 15, 2013


I got my start in bookkeeping beginning my senior year of high school when I worked part time in the family business, helping my grandmother in the office.  At the end of my sophomore year of college, my grandmother retired from the business and I took over, starting a career I hadn’t expected.  To better prepare myself to assume a leadership role in the business, I went back to college to get a Master’s degree in Finance.  Unfortunately, the Rust Belt Recession of the late 1970’s to early 1980’s took its toll on the business.  Using my advanced degree and experience, I began a career in accounting management.

My first job was with a county agency with a progressive director.  My first assignment was to buy a computerized word processing system for the secretarial staff.  Six months later, I was buying my first PC and Lotus 1-2-3 and beginning my “love affair” with computers.

By the late 1980’s, I discovered Intuit – first buying Turbo Tax and then Quicken.  In the late 1990’s, I went to work for a community development agency which had just declared bankruptcy.  The Director and I made the decision to go with QuickBooks to set up the new financial records.  After I taught myself how to use the program I trained the rest of the accounting staff on its use.  One of my major accomplishments was to set up the Customer:Job function to track payments from parents for the pre-school program.

Today, I am certified on all QuickBooks products and working on the advanced certification; certified on and have a working knowledge of Xero, Peachtree, SAP, Great Plains and CYMA.

I will be using this format to discuss the practical aspects of QuickBooks, provide some tips on how to perform different functions, share some ideas for specific industries and give you some shortcuts.  I will also provide some basic accounting tips.